Inland Empire credit unions are gaining in popularity

Credit Unions have a long way to go to catch up with traditional banks, but local credit unions are starting to make inroads in the mortgage market, an area that for years they barely touched.

The Inland Empire housing market is making a comeback, with sales and prices both on the rise in Riverside and San Bernardino counties during the past few months.

There is, however, at least one difference between this positive housing cycle and past upswings in the local housing sector.

This time, credit unions are playing a part in the comeback. No longer are prospective homebuyers, especially people looking to buy their first home, automatically going to a bank to get their mortgage loan.

Inland Empire-based credit unions originated 183 first mortgages between June of this year and June of 2014, loans that combined were worth more than $48 million, according to data compiled recently by the California & Nevada Credit Union Leagues.

That was the highest number of first mortgages issued by Inland Empire-based credit unions  since June 2007-’08, when those entities originated 473 first mortgages worth a combined $108.5 million, according to the credit union leagues.

That trend came to a halt with the onset of the recession in 2009-’10, when Inland Empire-based credit unions originated 77 first mortgages worth a combined $19.1 million.

From that point on first mortgages originated by Inland Empire-based credit unions began a steady comeback that’s likely to continue as more consumers become familiar with the advantages of borrowing from a credit union, said Matt Wrye, spokesman for the credit union leagues.

“These might seem like small numbers, but they do show that credit unions are having a major impact in the Inland Empire,” Wrye said. “These are locally-based financial institutions that are using their federal tax-exempt status to reinvest their earnings back into the local community.”

Credit unions vary from country to country, but in general they’re not-for-profit financial institutions that are member-owned, which means they don’t usually chase profits as intensely as traditional banks.

Credit unions are generally more community oriented than traditional banks, and they often provide services intended to promote community development. Ultimately, their primary goal is to provide loans and credit at competitive rates.

The growth of credit unions in the two-county region can also be seen in the growth of outstanding first-time mortgages, meaning mortgages that have not been paid off.

In June 1999, 44 such loans originated by Inland Empire-based credit unions were on the books.  By June of 2009, that number had reached a high of 2,871, and by June on this year there were 2,229 outstanding first mortgages issued by local credit unions, according to the credit union leagues.

One reason first-time homebuyers in the Inland Empire are going to locally-based credit unions for their first mortgages is because they can: there are currently 24 credit unions based in the Inland Empire, compared to nine locally-owned banks, and most of the latter focus on lending money to businesses, not consumers, according to the credit union leagues.

Also, there are multiple credit unions based outside of the Inland Empire yet have branch offices in the region, making credit unions even more accessible to local consumers.

Partly because of the housing crisis and recession, the public in general is more knowledgeable about credit unions than it once was, and has a better idea why credit unions can be preferable to banks, said Dwight Johnston, chief economist with the credit union leagues.

“Back in 1999, a lot of people didn’t know what credit unions were or what they did,” Johnston said. “Now they’re starting to learn more about them, and I think that’s because of the recession. A lot of people who got hurt during the recession got very angry at their banks, and they began looking for alternative solutions.”

For years credit unions specialized in automobile loans, so now they must change the perception that they’re confined to that market and that they can’t compete with banks on home loans, Johnston said.

They also have to stress their other benefits in comparison with banks, including lower fees and quicker response time when processing loans, Johnston said.

“Credit unions are being seen as more consumer friendly, and that’s helping them a lot,” Johnston said. “They’re owned by their members and they’re completely focused on consumers, so you usually get better service from them. Also, their fees are usually lower than the fees banks charge.”

Credit unions appear to be growing everywhere, not just the Inland Empire.

Credit union membership in the United States increased by 496,000 during the first quarter of this year to 102.8 million, according to CUNA Mutual Group in Madison, Wis., which offers insurance and other protections to credit unions and their employees and members.

That’s an annual growth rate of four percent, the highest growth rate achieved by the industry since March 1997.

Between June of this year and June 2014, credit union loan portfolios grew 10.6 percent while delinquency rates from credit union loans dropped to 0.7 percent earlier this year, their lowest rate since 2007, CUNA Mutual Fund reported.

Mortgages all but vanished from credit union portfolios during the recession, but now they’re coming back and some credit unions are taking a different approach to them, said Kevin Posey, chief executive officer of Thinkwise Credit Union in San Bernardino.

“We’re not trying to do a lot of volume in the mortgage market,” said Posey, who said  that Thinkwise, unlike some credit unions, didn’t abandon mortgages when the housing market hits its low point. “We’re doing them, but we’re taking a pretty conservative approach to them.”

Mortgages got so infrequent during the height of the recession at Riverside-based Altura Credit Union that they contracted with a third party to handle them, said Mark Hawkins, Altura’s chief executive officer.

“Before the downturn we were doing $75 to $100 million annually in mortgages, then we started outsourcing them because there just wasn’t much business,” Hawkins said. “Now it’s coming back, so we’re back in it. I think Generation Y is getting into its household formation years.”

Credit unions have become more aggressive in seeking out mortgage origination business, and they’ve been helped by the anger that was heaped upon banks in the aftermath of the economic collapse, Hawkins said.

“We’ve gotten lot of positive press since them,” Hawkins said. “Our best business has always come from word-of-mouth, but good press never hurts. As long as there’s a conversation going on about the benefits of joining a credit union, like there is now, it’s going to help us.”